The Business Benefits of Family-Friendly Policies

In today’s evolving familial landscape, American workers increasingly struggle with work-family conflicts. With a rise in dual-earner families and an increase in single-parent households, caregiving responsibilities are shouldered by more than half of all American workers.1 Family-friendly workplace policies allow employees to better balance their obligations at work and at home. These policies do not only improve workers’ lives. Family- friendly workplace policies are also beneficial for businesses. Paid leave grants employee access to family leave and sick leave without compensation losses, and workplace flexibility offers helpful arrangements like adaptable work schedules, job sharing, telecommuting, and alternative work locations. Such policies improve productivity without imposing burdensome costs on employers. To demonstrate the value of paid leave and workplace flexibility, common objections will be considered and countered, prompting a justified conclusion that family-friendly workplace policies benefit businesses.

Employers who do not adopt family-friendly policies often argue that paid leave and workplace flexibility policies lower productivity. On the contrary, enabling work-family balance advances employee recruitment and retention, improves worker productivity, and reduces absenteeism. When considering a position, workers evaluate a job’s bundle of compensation benefits, which may include paid leave and family-friendly flexibility. These policies attract workers and support businesses in recruitment to secure the best employees, improving firm productivity. (1) Many job seekers value family-friendly policies so much that they are willing to accept lower salaries in return, since workers conceive of family-friendly accommodations as an important component of their compensation bundle. (2) Evidence supports the fact that higher compensation increases business’ recruitment and retention, in addition to improving employee performance. (3) Family- friendly employers may also attract workers who would otherwise not participate in the labor market at all. (4) Businesses with policies like paid leave and workplace flexibility may select from more employee candidates, attract valuable human capital, and ultimately enhance the productivity of the company as a whole.

Not only do family-friendly policies improve the recruitment of skilled workers, but they also aid in retaining these employees. Work-family conflicts often force employees to decline a position or quit their jobs. The 2015 Economic Report of the President announces that almost 50 percent of working parents have declined a job offer because the position was not compatible with their family life (159). Research shows that many organizations experience a repeated pattern of women resigning after maternity leave as a result of the company’s schedule inflexibility, which conflicts with the new parents’ caretaking responsibilities. (5) The employee turnover that results from work-family incompatibility can be very costly. According to case studies, the median cost of replacing a worker is 21 percent of that employee’s annual salary.6 Policies like paid leave and workplace flexibility help companies avoid such common and expensive turnover. In a study of First Tennessee Bank, “supervisors rated by their workers as supportive of work-family balance retained employees twice as long as the bank average and kept more retail customers. Higher retention rates contributed to a 55% profit gain over two years,” BusinessWeek reports. (7) Researchers surveyed 120 New York employers and found that companies with flexible leave policies benefited from significantly lower turnover. (8) When Google extended its paid parental leave to five months, the rate of women employees leaving the company decreased by half. (9) Family-friendly benefits encourage the work-family balance that employees need to remain in their positions. Family-friendly policies harbor employee loyalty. To minimize the loss of firm-specific skills and costly turnover, businesses may improve their retention, and therefore their productivity, with accommodations that support work-family balance.

A worker’s efficiency is directly impacted by family responsibilites. Research finds that conflicts between family and job responsibilities are closely related to lower employee productivity. (10) If a company aims to boost its efficiency, the adoption of family-friendly policies may be the solution. In fact, studies show that firms offering benefits like paid leave and workplace flexibility are more productive overall. (11) Important research assures that employees do not abuse such benefits.12 Paid sick leave encourages employees to stay home when sick, which decreases the likelihood of infecting other workers and furthering business losses. Flexible work schedules are proven to be associated with less absenteeism and greater job satisfaction. (13) Unexpected absences are waste time and money and cause problems with uncertainty over daily workforce composition. Absenteeism due to conflicting work and family obligations costs employers an estimated $500-$2,000 per employee every year. (14) Dalton and Mesch (1990) discovered that work schedule flexibility reduces employee absences by more than 20 percent. These researchers suggest that flexible scheduling increases employee motivation by improving basic working conditions, since workers are better prepared to handle conflicts and inconveniences. (15) The 2014 US Council of Economic Advisors reports, “In a 2002 survey, researchers from the University of Cambridge determined that businesses with family-friendly policies, which includes either paid or unpaid leave, were more likely to have above average labor productivity than those without such policies.” Family-friendly policies enable employees to come to work healthy, energized, stress-free, and on time, creating a more productive workforce and business environment.

Those who object to family-friendly workplace policies commonly argue that paid leave and flexibility generate unsustainable, burdensome costs on employers. However, in addition to the productivity benefits discussed above, family-friendly policies prove to be cost effective and yield significant positive externalities. Results from current programs demonstrate such advantages. Of the 253 surveyed employers impacted by California’s paid family leave initiative, more than ninety percent reported either positive or no noticeable effect on profitability, morale, and turnover. (16) After Connecticut implemented a paid sick leave program, 47 percent of employers experienced no increase in cost, and 19 percent reported an increase of less than two percent, (17) a minimal cost relative to the long- term advantages of improved recruitment, retention, and productivity. In a 2002 study, researchers discovered that 92 percent of employers with workplace flexibility policies considered their entitlements cost effective. (18) Cisco’s extensive telecommuting options, which offer employees better work-family balance, save the company more than $275 million each year. (19) Wall Street Journal published a study on Fortune 500 companies. The study found firms’ stock prices rose in the days after the businesses announced family- friendly initiatives. (20) Investors value the increases in worker productivity and employee work-life balance that result from policies like paid leave and flexibility. In addition, family- friendly accommodations promote positive community relations and customer loyalty, (21) especially since polling data show that the public overwhelmingly favors these policies. (22)

When considering the cost effectiveness of family-friendly policies, it is important to account for positive externalities. Paid leave and workplace flexibility are beneficial for America’s economy, labor force, and future. The Economics of Paid and Unpaid Leave reports,

“[A] study examining the implementation of San Francisco’s paid sick leave law in 2007 found no evidence of a negative effect on the economy. Unlike surrounding areas that did not have a paid sick leave law, San Francisco saw an increase in total employment after the implementation of the law” (17).

Family-friendly policies open the labor force to those who would otherwise not be able to work due to their caregiving responsibilities. Research shows that California’s paid leave policy increased hours worked and total earnings for mothers with one to three year old children by 10 percent, especially among lower-wage workers who could not have afforded unpaid leave.23 Family-friendly policies sustain employment options for caretakers, boosting the economy on a wide scale level. When potential workers can foresee long-term career options in their futures, they will likely attain higher education, increase their skills, and maintain attachment to the labor force.24 The 2015 Economic Report of the President exhibits the positive externalities of widespread family-friendly policies:

“If flexible arrangements were coordinated across firms or part of a Federal program, costs would be spread out among employers, making such offerings more beneficial for them. In addition, it would prevent employers who refuse to provide flexibility to their workers from pricing their goods and services lower than competitors who do provide flexibility” (200).

Broad adoption of family-friendly policies can help small businesses that may struggle to match the generous leave and flexibility policies of larger firms. (25) Finally, family-friendly policies are proven to benefit family function and stability, improving child development. (26) Healthier and happier children promise a better American future, a stronger prospective workforce, and a general improvement in societal well-being. Such significant positive externalities illustrate the advantages of family-friendly workplace policies in America.

If family-friendly policies benefit businesses, why do some companies not offer paid leave or workplace flexibility? The likely reasons may include employers’ unawareness of the potential advantages of such policies, firms’ incapability of successful implementation, and reluctance to revise traditional work organization. Economic research shows that lack of information plays a significant role in the incomplete adoption of best management practices. (27) With dramatic labor force changes in recent years, managers may not yet recognize the evolving needs of employees and the downfalls of an outdated system. As more and more businesses continue to adopt family-friendly policies, competition in recruitment, retention, and productivity will likely encourage other firms to incorporate work-family accommodations as well. But responses to outside pressure and labor market competition take time. Implementation of new policies requires reorganization, training, and financial revisions. These first steps may be challenging or costly, preventing businesses from launching family-friendly initiatives. With a deeper understanding of the short- and long-term business benefits of policies like paid leave and workplace flexibility, employers will more readily invest in family-friendly improvements for their organizations.

Cultural obstacles may prevent certain businesses from adopting family-friendly policies. Distrust of their employees is a major reason why some employers are wary of granting flexibility. (28) Research finds such policies are most effective when paired with “favorable organizational culture” that is open to, aware of, and considerate about work- family balance. (29) All staff must fully understand and respect family-friendly policies in order for the policy benefits to arise, and this favorable culture requires quality training and communication. Often, a “workaholic” mentality marks work-family balance initiatives as too lenient or unprofessional. By spreading awareness about the immense need for family-friendly policies throughout America and the widespread benefits they foster, more businesses will embrace a culture welcoming work-family accommodations.

Barriers to family-friendly policy implementation may vary among different industries. Certain policies may not be compatible with every type of occupation. For example, retail clerks and food servicers likely could not work from home like a financial service employee could. Technological difficulties prevent many manufacturing workers from flexible work arrangements—the on-site nature of these jobs and formal shift schedules may make telecommuting and individual schedule flexibility especially difficult. (30) For all industries, an expanded training program allows employees to gain a wider skillset so that they may better substitute or compensate if a worker is not present. Some small business owners argue that family-friendly policies can only succeed in large firms, since every team member in a small business is essential in regular operations. But data shows that small firms actually provide more flexibility to workers than large firms do. (31) Small business managers may surpass other employers in their ability to understand the work- family needs of their employees and find solutions that benefit workers and business productivity. In general, family-friendly policies challenge traditional work organization, demanding business creativity, adaptability, and training. Difficulty in administration, schedule reorganization, and positive cultural shifts are natural bumps in the road leading to work-family balance. Businesses overcome these challenges by incorporating family consideration into work processes, job design, and organizational composition, as comparable to other concerns, like marketing or technological improvements. (32) A deeper understanding of the common barriers to implementation reveals that such obstacles do not overshadow the lasting benefits of family-friendly policies.

As work-family balance becomes harder to achieve for all Americans, businesses must respond with creative accommodations to recruit and retain workers. Paid leave and workplace flexibility improve employee morale and productivity. These benefits reduce expensive turnover and absenteeism. Family-friendly workplace policies prove to be cost- effective and yield transformative positive externalities, promising a stronger American economy, labor force, and future. As more employers continue to embrace the need to promote work-family balance, American firms will overcome the challenges in revising traditional work organization. Addressing the common arguments against work-family accommodations displays the clear advantages of family-friendly workplace policies, which widely benefit workers, families, and businesses.

By Lucille Marshall. Written for Introduction to American Politics with Professor Judith Russell at Columbia University.

29 Amah, Okechukwu. “Family-Work Conflict and the Availability of Work-Family Friendly Policy Relationship in Married Employees: The Moderating Role of Work Centrality and Career Consequence.” Research and Practice in Human Resource Management 18.2 (2010): 35-46. Web.